U.S. stocks rise, Treasuries fall as oil slides to two-month low

U.S. stocks rose, sending the Dow Jones Industrial Average within 40 points of a record, amid optimism the Federal Reserve will continue to provide monetary stimulus. Commodities dropped on concern changes in China’s policies may slow growth and hurt the global recovery.

The Dow rose as much as 37 points to 14,127.10 while the Standard & Poor’s 500 Index advanced 0.4% to 1,523.45 after retreating 0.4% earlier. The S&P GSCI Index of commodities fell for a fifth day, the longest slump of the year, as oil dipped below $90 a barrel for the first time this year. Japan’s five-year rate slid two basis points to a record 0.095%. Italy’s 10-year yield rose amid concern the country may need to hold another election. U.S. Treasuries fell.

Financial stocks led gains as Federal Reserve Vice Chairman Janet Yellen said the central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program. Earlier losses in global stocks followed data showing China’s service industries grew last month at the slowest pace since September and the cabinet last week tightened mortgage rules to cool the property market.

“The Fed is going to be our friend for an extended period of time,” Michael Mullaney, chief investment officer at Boston- based Fiduciary Trust Co., which manages $9.5 billion, said by telephone. “And as the old adage goes, don’t fight the Fed,” he said. “Risk assets are going to do reasonable well as long as the Fed and other central banks have got their checkbooks open, which is what they have right now.”

Budget Talks

While President Barack Obama phoned Democratic and Republican legislators over the weekend, his aides and congressional leaders signaled automatic spending cuts would continue for weeks, possibly months. Both sides indicated that revisiting the reductions would begin after they resolve a looming confrontation over legislation that’s needed to keep federal agencies running beyond March 27, placing a premium on avoiding a government shutdown.

“It’s going to be choppy this month,” said Michael Mullaney, chief investment officer at Boston-based Fiduciary Trust Co., which manages $9.5 billion. “We have this March 27th debt ceiling limit coming up. The partisan rancor is probably going to be pretty active coming out of Washington for the next few weeks.”

Investors have reduced bearish stock bets to the lowest level since at least 2007 as the bull market in American equities begins its fifth year.